Breakingviews-BT does its best to counteract government poaching

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(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)

By Quentin Webb

LONDON, June 19 (Reuters Breakingviews) - BT Group (BT.L) is
doing its best to counteract government poaching. After leading
an impressive turnaround, Chief Executive Ian Livingston is off
to Westminster. The timing is surprising: the telecoms group is
just embarking on a big push in television. But it is hard to
make the boss turn down a prestigious government gig. And a
strong internal successor signals continuity.

Livingston is a loss. He has cut costs, trimmed debts, found
a way to plug the huge hole in BT’s pension, and righted the
troublesome global services unit. He’s invested too, ploughing
money into fibre-optic networks. Shareholders have prospered.
The total return since Livingston took over in June 2008 has
been 81 percent, Datastream shows, against 26 percent for the
FTSE 100.

Yet the only real lesson this teaches about corporate
succession is to be prepared. There wasn’t much BT could do when
David Cameron called and asked if Livingston would like to
become a lord and serve as trade minister, replacing former HSBC
(HSBA.L) Chairman Stephen Green. And while corporate succession
plans usually span years, political timetables run faster. So it
was helpful BT already had a strong heir apparent in Gavin
Patterson, who takes over in September. Green’s exit at HSBC
created a boardroom split that exposed woeful succession
planning.

Patterson makes sense because he leads BT Retail. This deals
directly with home and business customers and is BT’s biggest
business line by revenue. His background is especially important
because the next big challenge is to prove an expensive push
into television can pay off. He has been central to this
project.

It is always worrying when a celebrated boss leaves. Hence
the dip in BT’s shares. One fear is that performance proves
unsustainable. Tesco (TSCO.L) is struggling in the post-Terry
Leahy era. But BT has a clear strategy, is investing heavily and
generates strong cash flows. A second worry is that a canny
leader picks the perfect time to leave. But the timing here is
not Livingston’s.

The last risk is simply that the successor is mediocre.
Patterson has strong credentials. Now he needs to convince
investors he is up to the job.

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CONTEXT NEWS

- BT Group’s chief executive officer, Ian Livingston, will
leave in September for a post in the British government, the
telecoms group said in a statement on June 19.

- Livingston, who has run BT since June 2008, will become
trade and investment minister. He will be replaced by Gavin
Patterson, a BT board member and CEO of the group’s retail
business.

- Shares in BT fell as much as 4 percent but later
recovered. By 1508 GMT they stood 1.66 percent lower at 314
pence a share.

- Reuters: BT CEO Livingston to step down to join UK
government [ID:nL5N0EV26Z]

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